On the banks of the Awali River, a few kilometers north of the town of Jezzine, some $320 million lie buried. But there’s no point in launching a hunt for this treasure, because it has already been stolen by landowners, bureaucrats, consultants, engineers and contractors. Together they have pocketed the money for construction of the Bisri Dam, which was supposed to provide water to more than 1.5 million people living near Mount Lebanon and the outskirts of Beirut, cutting the price of water by 80 percent.
The dam’s estimated cost was $617 million. Of this, the World Bank was supposed to lend the Lebanese government $477 million, and the government was supposed to pay the balance. But last week, the World Bank announced that it was freezing the project and halting payment of the loan’s final installment, around $240 million.
The term “freeze” sends an deceivingly optimistic message, implying that if the government meets the bank’s conditions, the bank would likely resume funding.
Lebanon signed the contract with the World Bank five years ago. Back then, the country still seemed capable of meeting long-term commitments, and the government seemed to care about its citizens’ concerns, concealing corruption.
The first beneficiaries of the international funding were the landowners, who received compensation for the expropriation of their land and for having to relocate out of the area where the dam would be built. Next was the Lebanese consulting firm Dar al-Handasah, which was initially hired by the government to examine the dam’s feasibility and was later appointed to handle expropriations and plan and supervise construction of the dam’s main pipeline and a tunnel.
When the consultant is also the contractors, it’s clear that the money is not serving the public. Even at this early stage, the stench of corruption had already filled the beautiful valley of the Awali River.
Soon afterward, civil society groups, environmental activists and residents of the area began protesting against the plan. They argued that it would harm the area’s dense forests, destroy habitats for flora and fauna, not provide the amount of water promised and change the region’s way of life.
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The biggest concern, however, was that the hundreds of millions of dollars in investment wouldn’t reach their target. After all, such was the case with the billions the government claimed to spend on electricity, trash removal, the port and other rehabilitation programs. Opponents of the dam argued that Lebanon, with its debt of $90 billion, can’t afford another failed adventure into infrastructure projects.
The World Bank belatedly realized that there was a problem with the dam. True, its agreement with the government required the latter to rehabilitate the forests after the dam was built and relocate an ancient church that the dam’s construction would have destroyed. But the public protest, which intensified this year, and the government’s foot-dragging on implementing its other contractual obligations led the bank to announce back in June that it intended to part ways with the project.
Lebanese President Michel Aoun, whose party holds the energy portfolio, then asked the bank for another extension. The bank agreed to give him until September 4, but it knew the government couldn’t meet that deadline, either.
Environmental activists, who had protested near the dam site for months, celebrated the bank’s decision. For them, this was not only a victory over a serious environmental threat, but also sweet revenge that would deny the governing elites and their cronies another channel to steal public funds.
But what will happen to the money that has already been invested? The World Bank created a page on its website with questions and answers about the decision to freeze the project. It said it's the Lebanese government must recoup the money from people who have already received compensation or payment for services, because the bank deals only with the government.
It’s safe to assume that the money will remain in the hands of those who received it. But perhaps it’s better that way. At least the landowners who were evicted will benefit, even if the dam isn’t built.
Between Washington and Paris
Meanwhile, the government – if it’s possible to dignify the collection of bickering political hacks by this name - is busy putting together the list of ministers who will serve under Prime Minister-designate Mustapha Adib. The new government will have two main goals – carrying out economic reforms, as demanded by the International Monetary Fund, and implementing the plan presented by French President Emmanuel Macron when he visited Beirut earlier this month.
The necessary measures include legislation to regulate the banking industry; a new, independent status for the central bank; a transparent examination – or more accurately, investigation – of the central bank’s operations in recent years; establishing a mechanism with teeth to uproot the corruption that has become foundational to the government’s existence; and a new election law that will grant suitable representation to additional groups and attempt to abolish the practice of divvying up positions according to religious sect.
Without implementing these reforms, Lebanon won’t be able to get the $11 billion it was promised at a meeting of donor states back in 2018. Nor will it be able to get the loan it is seeking from the IMF, which has gone nowhere despite nine meetings between the sides.
This week, the government did hire the American consulting firm Alvaraz & Marsal to examine the central bank’s conduct and recommend ways to improve its functioning. But the fear is that internal political considerations will drive a huge chasm between recommendations and implementation.
The Lebanese elites aren’t the only ones debating the government's composition and how to carry out reforms without undermining their benefits. Washington has demonstrated its own determination to shape the Lebanese regime by imposing sanctions on several politicians, at least two of whom are likely candidates for ministerial posts.
One is Youssef Fenianos, a former minister of transportation and public works. The second is Ali Hassan Khalil, who was finance minister from 2014 to 2020 and health minister from 2011 to 2014. The sanctions freeze any assets they have in the United States and penalize any individual or corporation – let alone government – that has commercial relations with them.
In explaining the sanctions, the U.S. Treasury Department said that both politicians have helped Hezbollah in recent years by funneling huge amounts of public funding to it and by helping it circumvent U.S. sanctions that bar Lebanese banks from dealing with the organization. In exchange, the treasury said, both men received political benefits and cash bribes from Hezbollah.
In Lebanon, the new sanctions are seen as an American attempt to intervene in the government’s composition and to warn the new prime minister against having Hezbollah members in his cabinet. But this policy is also likely to sharpen the disagreements between Washington and Paris. Macron, unlike U.S. President Donald Trump, hasn’t made Hezbollah’s exclusion from the government a condition, since France still draws a distinction between the organization’s military wing and its political wing.
Thus Adib, who has until now served as Lebanon’s ambassador to Germany and lacks political experience, will be forced to maneuver not only among Lebanon’s competing power centers, but also between France and the United States. In addition, he’ll have to deal with public outrage over last month’s explosion in Beirut’s port, which killed at least 190 people, wounded thousands and left thousands homeless.
Chaos at the end of the tunnel
The immediate challenge, which can’t wait for the formation of the new government, is how to help the victims of the blast. France managed to raise around $300 million for this purpose, but the money is on hold until a mechanism is set up to monitor distribution. The condition Macron set is that the money not be disbursed through government agencies, lest it end up in the pockets of politicians and their cronies or be used for political activity.
The criteria for allocating aid are unclear. And disputes and appeals make it likely that the money will rust before it reaches those entitled to it.
For now, civil-society and aid organizations are getting some of the money to assist with immediate needs. These groups are required to get a special permit from the army, which is serving as the liaison between field workers and donors.
Some 385 organizations have already registered, but they are operating with no coordination and no supervision. Some are doing small repairs like replacing shattered windows and broken doors or removing rubble. Around a dozen have received permits to do more extensive home repairs. Others are providing food and other essential aid to the needy.
An emergency military commission is assessing the damage to infrastructure, public buildings and homes that will require more substantial reconstruction. This is a lengthy process entailing intolerable bureaucracy. To date, only around 2,500 buildings have been inspected, out of tens of thousands that were damaged.
This is the most dangerous bomb threatening Lebanon’s survival as a functioning state. The public’s patience has long since been exhausted. The demonstrations that have taken place over the course of the year have already caused the government to be replaced twice, but neither of the new governments managed to gain the public’s trust or take the steps needed to rehabilitate the country.
Unemployment has skyrocketed to around 40 percent, and prices of staple products have risen by more than 100 percent. The exchange rate currently stands at about 8,000 Lebanese pounds to the dollar, and people who have dollar bank accounts aren’t allowed to withdraw from them.
Now, gasoline prices are expected to rise as well, and drivers have already started hoarding gas at home. They are also hoarding food, as if a war were about to erupt. They know that the road to collapse is paved.